Alamos narrows Q4 loss as buoyant outlook bolsters guidance

VANCOUVER (miningweekly.com) – Intermediate Canadian miner Alamos Gold on Thursday reported a net loss of $20.6-million, or $0.08 a share, for the three months ended December 31, citing stronger earnings from operations, offset by unrealised foreign exchange losses in both the foreign exchange and the deferred tax items.

This was an improvement from a net loss of $60.5-million, or $0.24 a share, in the year-earlier period.

During the period, Alamos sold 107 505 oz of gold for proceeds of $132.2-million, a 14% increase compared with the fourth quarter of 2015. This reflected a higher volume of ounces sold and a higher average realised price of $1 230/oz of gold, compared with $1 109/oz in the comparable period of 2015.

All-in sustaining costs (AISC) fell to $1 033/oz from $1 073/oz in the fourth quarter of 2015, reflecting lower sustaining capital at Young-Davidson, in Ontario, and Mulatos, in Mexico, as well as lower corporate and administrative expenses.

Gold production is expected to increase to a range of 400 000 oz to 430 000 oz in 2017, a 6% increase from 2016, based on the midpoint of guidance. AISC is expected to decrease by 7% to $940/oz, reflecting further cost reductions at both Young-Davidson and Mulatos.

Excluding higher-cost production from El Chanate, also in Mexico, AISC is expected to decrease to $890/oz.

Total capital spending for the company’s operating mines is expected to decrease to between $105-million and $122-million, a reduction from $128-million in 2016, even after factoring in $12-million of development spending for La Yaqui Phase I, located in Mulatos district, in 2017.

Alamos said exploration remains a focus, with a 2017 global exploration budget of $24-million, of which about $17-million will be spent at Mulatos.

RESOURCE UPDATE
Alamos also updated its resources, lifting total reserves by 31% to 7.7-million ounces.

This was mainly driven by increases at La Yaqui and Kirazlı and Aği Daği, in Turkey.

La Yaqui, including the Grande deposit, is now at 608 000 oz of reserves and total resources of 684 000 oz, with significantly more drilling planned at the project for 2017. Young-Davidson showed a drop of 5% in reserves owing to mine depletion, but the asset still offers considerable exploration upside at depth and to the west.

El Chanate was down 37% to 293 000 oz, as expected, as the mine is nearing completion, while Mulatos and its stockpiles fell to 1.07-million from 1.22-million in the year-earlier estimate.

TURKISH DELIGHT
Alamos on Wednesday released the results of two studies on two of its three Turkish gold and silver assets.

One was a feasibility study on Ağı Dağı, which last had a prefeasibility study (PFS) released on it in 2012, the other is a preliminary economic assessment (PEA) study on its earlier-stage Çamyurt project, which benefits from the infrastructure planned for Ağı Dağı.

Both projects are still in the permitting phase and are not as advanced as the Kirazlı project.

The new study for Ağı Dağı calls for a commercial mine life of five years, with an initial capital cost of $250-million, and at base-case price assumptions of $1 250/oz gold and $16/oz silver, yields an after-tax net present value (NPV), at a 5% discount rate, of $360-million. This is a 196% increase from the 2012 study.

Over the life of the mine, output is estimated at 973 300 oz of gold, averaging 177 600 oz/y, at total cash costs of $374/oz and all-in sustaining costs (AISC) of $411/oz. Sustaining and closure costs are estimated at $63-million.

The after-tax internal rate of return (IRR) is estimated at 39%.

The Çamyurt PEA assumes that the ore mined will be processed at the Ağı Dağı facilities at the end of that mine’s life. Using the same price assumptions, Çamyurt delivers an after-tax NPV, also at a 5% discount, of $111-million and yields an IRR of 253%, thanks to a low initial capital expenditure of $10-million, and sustaining and closure costs of $16-million.

Çamyurt is estimated to produce for four years, averaging 93 200 oz of gold and 403 000 oz of silver at total cash costs of $604/oz and AISC of $645/oz.

Meanwhile, Alamos last week released the results of a feasibility study on its Kirazlı project, which showed significantly improved economics compared with the 2012 PFS.

Despite using a 4% lower gold price at $1 250/oz, and a 39% lower silver price assumption at $16/oz, the project’s after-tax NPV, at a 5% discount rate, improved by 45% to $223-million.

The new study calls for higher gold and silver output, at 540 000 oz and 3.14-million ounces respectively, over the five-year mine life, and a 21% lower strip ratio and a 5% higher gold grade.

The 38% weaker Turkish lira helps to drive operating costs down by 33% to yield an AISC of $373/oz.

The feasibility study shows an after-tax IRR of 44% at $1 250/oz gold, and 24% at $950/oz.

The project would produce 104 000 oz of gold and 617 000 oz of silver a year over the mine life, at average total cash costs of $339/oz and AISC of $373/oz of gold, net of by-products.

Construction is expected to take two years after receiving the operating permit from the province – the last key permit sought.

Alamos outlined exploration upside with 400 m of favourable alteration extending to the west of the planned pit, which it plans to drill this year. There are a couple of satellite zones that will also be drilled this year, the company said.

Alamos's stock listed on the NYSE rose 3.11% on Thursday to close at $8.28 apiece, having added 21.05% since the start of the year.